Westpac employees will have access to up to four weeks of paid leave and a year of unpaid leave to make a gender transition under a new wages and conditions agreement.
The new enterprise bargaining agreement also doubles paid domestic violence support leave from 10 to 20 days. Aboriginal and Torres Strait Islander employees will be given access to three days for "Sorry Business".
Compassionate leave has been increased to three days per occasion and a 3.25 per cent pay rise will be given to employees that earn up to $82,500.
Finance Sector Union national assistant secretary Nathan Rees said Westpac was the first bank to have introduced transgender leave as far as he was aware.
"It is a positive step," he said.
"I'd congratulate Westpac on paid domestic violence leave. It is a really solid acknowledgement of the issue.
"They are also recognising that accreditation and skills and training is an important part of the future of the finance sector and they are prepared to work with the FSU on that."
University of Technology Sydney human resources management expert Sarah Kaine said the transgender leave policy was an indication that considerations of diversity were becoming more mainstream. She said it was a sign that diversity issues had broadened "beyond parents".
"We have moved beyond maternity and paternity leave in that debate," she said. "That of itself is a good sign that we have broadened how we are considering diversity beyond parents."
Deakin University in Victoria has reportedly introduced a new policy to give staff undergoing a sex change up to 10 days of paid leave.
A spokeswoman for Westpac said employees who wished to transition to a different sex could take up to four weeks of paid transition leave in a single block or in separate blocks.
"There is also access to counselling and support services if needed," she said.
"Westpac has a proud history of supporting the LGBTIQ community and we want employees to be themselves, no matter their gender or sexual orientation.
"This is something we feel passionate about, so we're please to have it in our EA."
The new enterprise agreement also extends parental leave benefits to long-term foster carers and paid leave for support carers has increased from two to three weeks.
Anna Patty is Workplace Editor for The Sydney Morning Herald. She is a former Education Editor, State Political Reporter and Health Reporter. Her reports on inequity in schools funding led to the Gonski reforms and won her national awards. Her coverage of health exposed unnecessary patient deaths at Campbelltown Hospital and led to judicial and parliamentary inquiries. At The Times of London, she exposed flaws in international medical trials.